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Informist, Thursday, Aug. 20, 2026

 

By Meera Nair

 

MUMBAI – Rates on certificates of deposit rose 10-15 basis points across tenors on Thursday as the hawkish tone in the minutes of the Reserve Bank of India's August Monetary Policy Committee meeting added to uncertainty over the interest-rate outlook. Trading in the commercial paper market was lacklustre, dealers said.

 

Yields on three-month CDs were quoted at 6.50-6.55%, up 10 bps from 6.40-6.45% on Wednesday, while six-month CDs were quoted at 6.90-6.95%, up 15 bps from 6.75?rlier. There were no trades in the one-year CD segment, dealers said.

 

The CD market was relatively active, with participants focusing on rollovers and meeting redemption-related demand from mutual funds, dealers said. January, February, March and June maturities were among the actively traded segments.

 

"Yields are going higher due to the current uncertainties and will continue till September, post the close of FCNR(B)(foreign currency non-resident [bank])," a dealer at a public sector bank said.

 

The Reserve Bank of India has been closely monitoring foreign currency non-resident (bank) deposit flows, with market participants expecting liquidity conditions to shift as inflows taper after the FCNR(B) window closes.

 

In the CP market, there were no trades in three-month, six-month and one-year papers of AAA-rated issuers, as investors remained cautious amid uncertainty, dealers said. Market participants have adopted a wait-and-watch approach, they said. CPs maturing in August and September, however, traded actively, dealers said.   

 

Secondary-market turnover in CDs rose to INR 97.40 billion Thursday from INR 91.27 billion Wednesday, according to Clearing Corp of India Ltd data. Primary-market CD issuances, however, fell sharply to INR 5 billion from INR 45.75 billion a day earlier, with Jammu and Kashmir Bank being the only issuer. The bank raised INR 5 billion through a 91-day CD at a weighted average yield of 6.88%.

 

"Issuances have been very low today (Thursday) because of the FCNR flows, and in August there were fewer maturities. But in September, this will not be the case as we expect a lot of maturities next month. Also, there is INR 1.45 trillion of CD outstanding across all banks as of now," the dealer at the public-sector bank said.

 

The dealer said higher secondary-market CD volumes were driven by mutual fund portfolio rebalancing, while banks with surplus funds were also buying CDs in the secondary market.

 

Secondary-market turnover in CPs rose to INR 65.95 billion Thursday from INR 43.80 billion Wednesday. Fresh CP issuances, however, fell to INR 39.20 billion as of 1747 IST from INR 97.70 billion a day earlier.

 

Can Fin Homes, DSP Finance, Kotak Securities, ICICI Securities, and Bajaj Financial Securities were among the issuers. Can Fin Homes raised INR 5 billion through a 91-day CP at a weighted average yield of 6.45%, while DSP Finance raised INR 3.5 billion at 7.44%. Kotak Securities raised INR 2.25 billion through CPs at a weighted average yield of 6.63%, while ICICI Securities raised INR 2 billion at a weighted average yield of 7.12%.

 

Dealers expect CD and CP rates to rise by around 5 bps by Friday, as market participants remain cautious about liquidity conditions and the interest-rate outlook.

 

Net liquidity absorbed by the RBI, a proxy for banking system surplus liquidity, fell to INR 3.71 trillion Wednesday from INR 3.91 trillion Tuesday. Goods and services tax payments have begun and totalled around INR 500 billion to INR 800 billion Thursday, with total outflows of around INR 1.80 trillion likely to reflect in banking-system liquidity by Monday, dealers said.

 

The expected liquidity outflow could put further upward pressure on short-term rates, particularly as market participants prepare for higher CD maturities in September and remain cautious about the sustainability of FCNR(B)-related inflows.

 

--Primary market 

* Jammu and Kashmir Bank was the only CD issuer on Thursday.

* Can Fin Homes, DSP Finance, Kotak Securities, ICICI Securities, and Bajaj Financial Securities were among the CP issuers on Thursday.

 

--Secondary market

* HDFC Bank's CD maturing Friday was traded six times at a weighted average yield of 5.08%.
* Cholamandalam Investment and Finance Co.'s CP maturing Friday was traded five times at a weighted average yield of 5.27%.

 

The following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed on CCIL's F-TRAC platform:

 

Certificates of deposit		Commercial papers
Thursday	Wednesday	Thursday	Wednesday
97.40	91.27	65.95	43.80

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

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